UK FTSE set for biggest drop of 2014 on weak U.S. data

LONDON, Jan 23 Britain's main equity index was
set for its biggest one-day fall this year on Thursday, weighed
down by disappointing U.S. economic data and weak updates from
Easyjet and Pearson.

The FTSE 100 extended losses in the afternoon as
data showed U.S. manufacturing growth slowed in January for the
first time in three months, further denting sentiment about the
world's largest economy after discouraging earnings reports from
bellwether companies such as McDonald's Corp.

The FTSE 100 was down 60.11 points, or 0.9 percent
to 6,766.22 points at 1555 GMT, on course for its biggest daily
loss since Dec. 12 and slipping further away from an
eight-months high of 6,867 points hit on Tuesday.

The FTSE is still up roughly 5 percent since mid-December,
boosted by flows of money into Europe in light of
better-than-expected data in Britain and the euro zone, which
are responsible for half of the sales generated by UK blue
chips.

"We are holding our longs at the moment as we feel the UK
markets are looking stronger than the U.S.," Ed Woolfitt, head
of trading at Galvan, said.

The FTSE fell in just eight of the last 24 trading days and
each dip was followed by a stronger bounce in the index over the
following few days. Some traders bet this time will be no
different.

"All the little moves (down) ended up being bought so it's
likely that it will be the same case here, albeit this one is a
bit more dramatic," Giles Watts, head of equities at City Index,
said.

Watts still expected the FTSE to head towards an all time
high of 6,950 set in late 1999.

Shares in Pearson plunged 8.2 percent, their biggest fall in
12 years, after the publisher reported big restructuring charges
alongside weak demand in its education businesses in North
America and Britain.

"There are a lot of structural pressures on the business and
we don't see any sort of mitigation of these pressures
near-term," said Investec analyst Steve Liechti, who put his
estimates, price target and recommendation for the stock under
review after the update.

Easyjet was also among the top fallers, off 3.9 percent
after the budget airline guided that first half seasonal losses
would be higher this year than last year due to the timing of
Easter, which falls in its fiscal second half.

"At the minute people are just trying to get out. Some of
the longer term players are taking profits (on Easyjet)," said
Vinay Sharma, trader at Gekko Global Markets.

Basic materials knocked a further 3.4 points off the FTSE as
data showed activity in China's factory sector contracted in
January for the first time in six months, according to the
Markit/HSBC PMI, pointing to a weak start in 2014.

Robert Quinn, chief European equity strategist at S&P
Capital IQ, said he preferred continental European indexes to
the FTSE in light of the latter's larger weighting in basic
materials, energy and consumer staples stocks. All of those
sectors are expected to suffer from an ongoing economic slowdown
in emerging markets.

FRANKFURT/LONDON, Dec 9 The European Central
Bank hopes its decision to confront struggling Italian bank
Monte dei Paschi at last will draw a line under a multi-year
crisis that has risked tarnishing its reputation as a credible
supervisor.

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